The Organisation for Economic Cooperation and Development (OECD) put forward recommendations to implement base erosion and profit shifting (BEPS) to achieve a more equitable international tax system as it applies to multinational companies. It is anticipated that businesses would gain clarity and peace of mind from tightening tax loopholes evident in the current inconsistent tax laws across borders.
Hanrick Curran’s Tax Partner and Chairman of Alliott Group’s Asia Pacific region, Jamie Towers has been leading Group discussions on the implementation across borders as recently as October 2016. The key challenges are discussed in an article published by the Association of Chartered Certified Accountants (ACCA), a leading international accountancy body.
As outlined in the article, the Asia Pacific region has a mixed representation of nations which are culturally, geographically and economically diverse. Compounding that, very few of the Asia-Pacific nations are actually members of the OECD which softens the pressure to implement these changes regardless of government support for the initiative.
In a recent Thomson Reuters study the number of respondents who report proactively taking steps in responding to BEPS has increased by 12% year on year to 66% overall, led by the UK (80%), Europe (75%) and the US (64%).
The slowest on the uptake, according to the findings, is Asia Pacific, where just 40% of respondents reported proactively taking steps and one-third (33%) are waiting to see what others in the region do.
Blanket BEPS adoption region-wide will be complex as some Asia-Pacific countries only have tax-treaties with neighbouring countries and have less advanced domestic tax laws than those international laws proposed under the OECD recommendations.
Australia has led the way already passing laws in relation to country-by-country reporting and has openly supported the OECD’s recommendations. Whilst there is no quick fix, the eventual implementation of OECD recommendations will largely address the international tax rule mismatches that create gaps for multinationals to shift profits into low (or no) corporate tax jurisdictions.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.